VC’s tend to get nervous when backing solo founders. Typically, we see two or three founder teams with roles split between Product & Engineering and Commercial & Finance. It’s very rare that we see a founder coming from a Talent / People background.
Recently, I came across 3 startups that had 6 or 7 founders. My initial thought was, “How the hell does that work?”
The companies are Billie (Series C, raised $152M), with whom we’re now working, and Pitch (Series B, raised $136M) – plus The Mothership (raising a significant seed round – watch this space).
So I asked the CEO of The Mothership, 🎢 Ben Fletcher 🎢, why they decided on 6 founders?
“We knew we were going to grow fast,” he explained, “and we wanted to assemble a team of experts in different areas of online marketing. The 6 founders were those people we knew with the best skills and with the potential to be key leaders for the future”
What are the Pros to this approach?
Speed – first of all. Hiring senior people takes 6 months or more and the data suggests that the average tenure is around 15 months. So you’re constantly dealing with replacing key positions, a quandary which often comes at the worst possible time. However, by starting with a senior leadership team you should be able to move and grow faster once you have the product/market fit right and the funding in place.
Fundraising – next up. VC’s tend to like founding teams that have worked together and are second-time founders. You might even be able to skip seed funding (the most expensive round for founders) and go straight to Series A. If 80% of a Series A investment goes to hiring people and you already have the key team members in your corner, I’d say you hit the ground running with a leadership team in place.
Trust and Communication – very important! In the cases of Billie and Pitch, nearly all the founders had previously met whilst working together at a scale-up. They had already observed each other performing in their respective roles. I’m guessing they probably saw quite clearly, there and then, what doesn’t work. Consequently, they had clarity on what they didn’t want their next venture to look like or feel like.
Cover Me – the hot potato! Leave for childcare, holidays or illness means a growing business can never have enough senior leaders to deal with life’s ups and downs. If the founders go on holiday and the decision-making grounds to a halt, something’s not right… Go figure!
TAM – the Big Kahuna? In order to raise a significant round – like $100M+ – you need to have a total addressable market (TAM) of at least $5 Billion or, in most cases, multiples of this. I do wonder whether, by starting with a larger founding team, you’re thereby forced to aim at solving a big problem or covering a large market right from Day One.
And what are the Cons here?
A piece of the pie – first and foremost. Of course, we’re all in it for the mission…but a little money doesn’t hurt! Splitting 100% of the equity 7 ways works out at 14% each. Adding a VC round at Series A, even at a healthy valuation, likely brings you to <10% each. For some founders this thought alone would make this idea a show-stopper. Billie and Pitch have valuations well over $300M. So the question is this. Do you, as a founder, want a larger piece of nothing or a smaller piece of something very valuable?
Does having 6 or 7 opinions carrying equal weight make it harder to make decisions? Might this not create factions within the founder group? Surely someone needs to be the ultimate decision maker? How do you manage leadership with a team of 6 or 7 leaders?
Maybe having each founder make ultimate decisions for their part of the company alone is a healthier way to operate? I myself am sure that, on the big calls, there is some healthy debate; and this is not necessarily a bad thing. If roles and responsibilities, and events like fundraising, are well planned, this could work well.
But what else might contribute to the downside of a startup with 6 or 7 founders? The collective leadership question rests arguably on the chemistry of the co-founders’ personality. Putting this to one side, it appears safe to conclude that there are, ultimately, no rights or wrongs; there are simply pros and cons. As a founder, it’s your job to weigh up the pros and cons and their relative weights. It’s a matter of your own initiative when and where to add weight to a particular aspect – and then to determine what’s the best option for you, personally.
To quote Andy Warhol, “Everything is chemistry.”
